The Retro Future

by John Michael Greer

The Archdruid Report (April 15 2015)

Is it just me, or has the United States taken yet another great leap forward into the surreal over the last few days? Glancing through the news, I find another round of articles babbling about how fracking has guaranteed America a gaudy future as a petroleum and natural gas exporter. Somehow none of these articles get around to mentioning that the United States is a major net importer of both commodities, that most of the big-name firms in the fracking industry have been losing money at a rate of billions a year since the boom began, and that the pileup of bad loans to fracking firms is pushing the US banking industry into a significant credit crunch, but that’s just par for the course nowadays.

Then there’s the current tempest in the media’s teapot, Hillary Clinton’s presidential run. I’ve come to think of Clinton as the Khloe Kardashian of American politics, since she owed her original fame to the mere fact that she’s related to someone else who once caught the public eye. Since then she’s cycled through various roles because, basically, that’s what Famous People do, and the US presidency is just the next reality-TV gig on her bucket list. I grant that there’s a certain wry amusement to be gained from watching this child of privilege, with the help of her multimillionaire friends, posturing as a champion of the downtrodden, but I trust that none of my readers are under the illusion that this rhetoric will amount to anything more than all that chatter about hope and change eight years ago.

Let us please be real: whoever mumbles the oath of office up there on the podium in 2017, whether it’s Clinton or the interchangeably Bozoesque figures currently piling one by one out of the GOP’s clown car to contend with her, we can count on more of the same: more futile wars, more giveaways to the rich at everyone else’s expense, more erosion of civil liberties, more of all the other things Obama’s cheerleaders insisted back in 2008 he would stop as soon as he got into office. As Arnold Toynbee pointed out a good many years ago, one of the hallmarks of a nation in decline is that the dominant elite sinks into senility, becoming so heavily invested in failed policies and so insulated from the results of its own actions that nothing short of total disaster will break its deathgrip on the body politic.

While we wait for the disaster in question, though, those of us who aren’t part of the dominant elite and aren’t bamboozled by the spectacle du jour might reasonably consider what we might do about it all. By that, of course, I don’t mean that it’s still possible to save industrial civilization in general, and the United States in particular, from the consequences of their history. That possibility went whistling down the wind a long time ago. Back in 2005, the Hirsch Report showed that any attempt to deal with the impending collision with the hard ecological limits of a finite planet had to get under way at least twenty years before the peak of global conventional petroleum reserves, if there was to be any chance of avoiding massive disruptions. As it happens, 2005 also marked the peak of conventional petroleum production worldwide, which may give you some sense of the scale of the current mess.

Consider, though, what happened in the wake of that announcement. Instead of dealing with the hard realities of our predicament, the industrial world panicked and ran the other way, with the United States well in the lead. Strident claims that ethanol – er, solar – um, biodiesel – okay, wind – well, fracking, then – would provide a cornucopia of cheap energy to replace the world’s rapidly depleting reserves of oil, coal, and natural gas took the place of a serious energy policy, while conservation, the one thing that might have made a difference, was as welcome as garlic aioli at a convention of vampires.

That stunningly self-defeating response had a straightforward cause, which was that everyone except a few of us on the fringes treated the whole matter as though the issue was how the privileged classes of the industrial world could maintain their current lifestyles on some other resource base. Since that question has no meaningful answer, questions that could have been answered – for example, how do we get through the impending mess with at least some of the achievements of the last three centuries intact? – never got asked at all. At this point, as a result, ten more years have been wasted trying to come up with answers to the wrong question, and most of the doors that were still open in 2005 have been slammed shut by events since that time.

Fortunately, there are still a few possibilities for constructive action open even this late in the game. More fortunate still, the ones that will likely matter most don’t require Hillary Clinton, or any other member of America’s serenely clueless ruling elite, to do something useful for a change. They depend, rather, on personal action, beginning with individuals, families, and local communities and spiraling outward from there to shape the future on wider and wider scales.

I’ve talked about two of these possibilities at some length in posts here. The first can be summed up simply enough in a cheery sentence: “Collapse now and avoid the rush!” In an age of economic contraction – and behind the current facade of hallucinatory paper wealth, we’re already in such an age – nothing is quite so deadly as the attempt to prop up extravagant lifestyles that the real economy of goods and services will no longer support. Those who thrive in such times are those who downshift ahead of the economy, take the resources that would otherwise be wasted on attempts to sustain the unsustainable, and apply them to the costs of transition to less absurd ways of living. The acronym LESS – “Less Energy, Stuff, and Stimulation” – provides a good first approximation of the direction in which such efforts at controlled collapse might usefully move.

The point of this project isn’t limited to its advantages on the personal scale, though these are fairly substantial. It’s been demonstrated over and over again that personal example is far more effective than verbal rhetoric at laying the groundwork for collective change. A great deal of what keeps so many people pinned in the increasingly unsatisfying and unproductive lifestyles sold to them by the media is simply that they can’t imagine a better alternative. Those people who collapse ahead of the rush and demonstrate that it’s entirely possible to have a humane and decent life on a small fraction of the usual American resource footprint are already functioning as early adopters; with every month that passes, I hear from more people – especially young people in their teens and twenties – who are joining them, and helping to build a bridgehead to a world on the far side of the impending crisis.

The second possibility is considerably more complex, and resists summing up so neatly. In a series of posts here in 2010 and 2011, and then in my book Green Wizardry {1}, I sketched out the toolkit of concepts and approaches that were central to the appropriate technology movement back in the 1970s, where I had my original education in the subjects central to this blog. I argued then, and still believe now, that by whatever combination of genius and sheer dumb luck, the pioneers of that movement managed to stumble across a set of approaches to the work of sustainability that are better suited to the needs of our time than anything that’s been proposed since then.

Among the most important features of what I’ve called the “green wizardry” of appropriate tech is the fact that those who want to put it to work don’t have to wait for the Hillary Clintons of the world to lift a finger. Millions of dollars in government grants and investment funds aren’t necessary, or even particularly useful. From its roots in the Sixties counterculture, the appropriate tech scene inherited a focus on do-it-yourself projects that could be done with hand tools, hard work, and not much money. In an age of economic contraction, that makes even more sense than it did back in the day, and the ability to keep yourself and others warm, dry, fed, and provided with many of the other needs of life without potentially lethal dependencies on today’s baroque technostructures has much to recommend it.

Nor, it has to be said, is appropriate tech limited to those who can afford a farm in the country; many of the most ingenious and useful appropriate tech projects were developed by and for people living in ordinary homes and apartments, with a small backyard or no soil at all available for gardening. The most important feature of appropriate tech, though, is that the core elements of its toolkit – intensive organic gardening and small-scale animal husbandry, homescale solar thermal technologies, energy conservation, and the like – are all things that will still make sense long after the current age of fossil fuel extraction has gone the way of the dinosaurs. Getting these techniques into as many hands as possible now is thus not just a matter of cushioning the impacts of the impending era of crisis; it’s also a way to start building the sustainable world of the future right now.

Those two strategies, collapsing ahead of the rush and exploring the green wizardry of appropriate technology, have been core themes of this blog for quite a while now. There’s a third project, though, that I’ve been exploring in a more abstract context here for a while now, and it’s time to talk about how it can be applied to some of the most critical needs of our time.

In the early days of this blog {2}, I pointed out that technological progress has a feature that’s not always grasped by its critics, much less by those who’ve turned faith in progress into the established religion of our time. Very few new technologies actually meet human needs that weren’t already being met, and so the arrival of a new technology generally leads to the abandonment of an older technology that did the same thing. The difficulty here is that new technologies nowadays are inevitably more dependent on global technostructures, and the increasingly brittle and destructive economic systems that support them, than the technologies they replace. New technologies look more efficient than old ones because more of the work is being done somewhere else, and can therefore be ignored – for now.

This is the basis for what I’ve called the externality trap {3}. As technologies get more complex, that complexity allows more of their costs to be externalized – that is to say, pushed onto someone other than the makers or users of the technology. The pressures of a market economy guarantee that those economic actors who externalize more of their costs will prosper at the expense of those who externalize less. The costs thus externalized, though, don’t go away; they get passed from hand to hand like hot potatoes and finally pile up in the whole systems – the economy, the society, the biosphere itself – that have no voice in economic decisions, but are essential to the prosperity and survival of every economic actor, and sooner or later those whole systems will break down under the burden. Unlimited technological progress in a market economy thus guarantees the economic, social, and/or environmental destruction of the society that fosters it.

The externality trap isn’t just a theoretical possibility. It’s an everyday reality, especially but not only in the United States and other industrial societies. There are plenty of forces driving the rising spiral of economic, social, and environmental disruption that’s shaking the industrial world right down to its foundations, but among the most important is precisely the unacknowledged impact of externalized costs on the whole systems that support the industrial economy. It’s fashionable these days to insist that increasing technological complexity and integration will somehow tame that rising spiral of crisis, but the externality trap suggests that exactly the opposite is the case – that the more complex and integrated technologies become, the more externalities they will generate. It’s precisely because technological complexity makes it easy to ignore externalized costs that progress becomes its own nemesis.

Yes, I know, suggesting that progress isn’t infallibly beneficent is heresy, and suggesting that progress will necessarily terminate itself with extreme prejudice is heresy twice over. I can’t help that; it so happens that in most declining civilizations, ours included, the things that most need to be said are the things that, by and large, nobody wants to hear. That being the case, I might as well make it three for three and point out that the externality trap is a problem rather than a predicament. The difference, as longtime readers know, is that problems can be solved, while predicaments can only be faced {4}. We don’t have to keep loading an ever-increasing burden of externalized costs on the whole systems that support us – which is to say, we don’t have to keep increasing the complexity and integration of the technologies that we use in our daily lives. We can stop adding to the burden; we can even go the other way.

Now of course suggesting that, even thinking it, is heresy on the grand scale. I’m reminded of a bit of technofluff in the Canadian media a week or so back {5} that claimed to present a radically pessimistic view of the next ten years. Of course it had as much in common with actual pessimism as lite beer has with a pint of good brown ale; the worst thing the author, one Douglas Coupland, is apparently able to imagine is that industrial society will keep on doing what it’s doing now – though the fact that more of what’s happening now apparently counts as radical pessimism these days is an interesting point, and one that deserves further discussion.

The detail of this particular Dystopia Lite that deserves attention here, though, is Coupland’s dogmatic insistence that “you can never go backward to a lessened state of connectedness”. That’s a common bit of rhetoric out of the mouths of tech geeks these days, to be sure, but it isn’t even remotely true. I know quite a few people who used to be active on social media and have dropped the habit. I know others who used to have allegedly smart phones and went back to ordinary cell phones, or even to a plain land line, because they found that the costs of excess connectedness outweighed the benefits. Technological downshifting is already a rising trend, and there are very good reasons for that fact.

Most people find out at some point in adolescence that there really is such a thing as drinking too much beer. I think a lot of people are slowly realizing that the same thing is true of connectedness, and of the other prominent features of today’s fashionable technologies. One of the data points that gives me confidence in that analysis is the way that people like Coupland angrily dismiss the possibility. Part of his display of soi-disant pessimism is the insistence that within a decade, people who don’t adopt the latest technologies will be dismissed as passive-aggressive control freaks. Now of course that label could be turned the other way just as easily, but the point I want to make here is that nobody gets that bent out of shape about behaviors that are mere theoretical possibilities. Clearly, Coupland and his geek friends are already contending with people who aren’t interested in conforming to the technosphere.

It’s not just geek technologies that are coming in for that kind of rejection, either. These days, in the town where I live, teenagers whose older siblings used to go hotdogging around in cars ten years ago are doing the same thing on bicycles today. Granted, I live in a down-at-the-heels old mill town in the north central Appalachians, but there’s more to it than that. For a lot of these kids, the costs of owning a car outweigh the benefits so drastically that cars aren’t cool any more. One consequence of that shift in cultural fashion is that these same kids aren’t contributing anything like so much to the buildup of carbon dioxide in the atmosphere, or to the other externalized costs generated by car ownership.

I’ve written here already about deliberate technological regression {6} as a matter of public policy. Over the last few months, though, it’s become increasingly clear to me that deliberate technological regression as a matter of personal choice is also worth pursuing. Partly this is because the deathgrip of failed policies on the political and economic order of the industrial world, as mentioned earlier, is tight enough that any significant change these days has to start down here at the grassroots level, with individuals, families, and communities, if it’s going to get anywhere at all; partly, it’s because technological regression, like anything else that flies in the face of the media stereotypes of our time, needs the support of personal example in order to get a foothold; partly, it’s because older technologies, being less vulnerable to the impacts of whole-system disruptions, will still be there meeting human needs when the grid goes down, the economy freezes up, or something really does break the internet, and many of them will still be viable when the fossil fuel age is a matter for the history books.

Still, there’s another aspect, and it’s one that the essay by Douglas Coupland mentioned above managed to hit squarely: the high-tech utopia ballyhooed by the first generation or so of internet junkies has turned out in practice to be a good deal less idyllic, and in fact a good deal more dystopian, than its promoters claimed. All the wonderful things we were supposedly going to be able to do turned out in practice to consist of staring at little pictures on glass screens and pushing buttons, and these are not exactly the most interesting activities in the world, you know. The people who are dropping out of social media and ditching their allegedly smart phones for a less connected lifestyle have noticed this.

What’s more, a great many more people – the kids hotdogging on bikes here in Cumberland are among them – are weighing the costs and benefits of complex technologies with cold eyes, and deciding that an older, simpler technology less dependent on global technosystems is not just more practical, but also, and importantly, more fun. True believers in the transhumanist cyberfuture will doubtless object to that last point, but the deathgrip of failed ideas on societies in decline isn’t limited to the senile elites mentioned toward the beginning of this post; it can also afflict the fashionable intellectuals of the day, and make them proclaim the imminent arrival of the future’s rising waters when the tide’s already turned and is flowing back out to sea.

I’d like to suggest, in fact, that it’s entirely possible that we could be heading toward a future in which people will roll their eyes when they think of Twitter, texting, 24/7 connectivity, and the rest of today’s overblown technofetishism – like, dude, all that stuff is so twenty-teens! Meanwhile, those of us who adopt the technologies and habits of earlier eras, whether that adoption is motivated by mere boredom with little glass screens or by some more serious set of motives, may actually be on the cutting edge: the early adopters of the Retro Future. We’ll talk about that more in the weeks ahead.


John Michael Greer is the Grand Archdruid of the Ancient Order of Druids in America {7} and the author of more than thirty books on a wide range of subjects, including peak oil and the future of industrial society. He lives in Cumberland, Maryland, an old red brick mill town in the north central Appalachians, with his wife Sara.









Categories: Uncategorized

Inflation and Currency Wars

Financial Sense (November 18 2011)

Editor’s Note:

This comprehensive and eye-opening interview with Jim Rickards is being re-featured as it provides an excellent summary of his recently released book, Currency Wars: The Making of the Next Global Crisis {1}.

The Hera Research Newsletter {2} (HRN) is pleased to present an eye opening interview with James G Rickards, Senior Managing Director of Tangent Capital Partners, a merchant bank specializing in alternative asset management solutions, and also Chief Operating Officer of Oro Capital Advisors, LLC, a commercial real estate advisory firm and Tangent Capital affiliate. He is a counselor, economist and investment advisor with 35 years experience in global capital markets.

Mr Rickards has held senior executive positions at Citibank, RBS, Long-Term Capital Management and Caxton Associates. In 1998, he was the principal negotiator of the rescue of LTCM sponsored by the Federal Reserve Bank of New York. His clients include private funds, investment banks and government directorates in national security and he is an advisor on global capital markets to the US Office of the Director of National Intelligence. He is a frequent speaker at conferences on derivatives and hedge funds and is active in the International Bar Association. He has been interviewed in The Wall Street Journal and the Economist, has appeared on CNBC, Fox, CNN, BBC and NPR and is an Op-Ed contributor to the Financial Times, New York Times and the Washington Post.

Mr Rickards, who is a visiting lecturer at the Kellogg School and the School of Advanced International Studies, has delivered papers on econophysics at the Applied Physics Laboratory and the Los Alamos National Laboratory and has written articles on cognitive diversity, network science and risk management. Mr Rickards holds an LLM (Taxation) from the New York University School of Law; a JD from the University of Pennsylvania Law School; an MA in international economics from the School of Advanced International Studies and a BA (with honors) from The Johns Hopkins University.

Hera Research Newsletter (HRN): Thank you for taking the time to speak with us today. Let’s talk about the Federal Reserve’s quantitative easing program (QE2). Is there a risk of price inflation?

Jim Rickards: I think there is a definite and highly significant danger of inflation coming from QE and QE2 specifically. A lot of people have said, in fact, the Fed has said, that, if you look at the key price indices, the Producer Price Index (PPI), Consumer Price Index (CPI), and the Personal Consumption (PC) price deflator, they are very, they use the phrase, “well behaved”. For the past year and a half, the critics, and I would include myself, have been saying that this situation is dangerous and unstable. The Fed has been pointing to the price indices and saying that you can’t find inflation under a rock, you can’t find inflation with a microscope, so what are you worried about?

HRN: Why do you think the situation is unstable?

Jim Rickards: There is a lot of inflation, but it is being offset by deflation. I compare it to an arm wrestling match. If you’ve ever seen an arm wrestling match with two really powerful participants, nothing really happens for a long time. The two arms just kind of sit there, then all of a sudden it starts to tip, then one guy just breaks and his arm is slammed down on the table. Just because nothing is happening at the surface doesn’t mean that a lot of things aren’t happening below the surface. In a depression, such as the one that began in 2007, you have very, very strong deflationary forces. I call it a natural deflation that’s being offset by policy inflation. So the fact that the price indices are around zero doesn’t mean that they’re well behaved, it just means that they’re masking the two tectonic forces that are pushing against each other.

HRN: Do you think deflation will win, or will it be inflation?

Jim Rickards: For the past year and a half, I’ve wondered which way it’s going to tip. If I’m right about those two forces, one of them is going to prevail at the end of the day and, on which one it’s going to be, I really reserve judgment because I could argue it both ways. I am now coming down on the side of inflation because the inflation is becoming very, very apparent. So, the first thing is that the well behaved indices are masking more than they’re telling us because, below the surface, there are powerful deflationary and inflationary forces fighting each other.

HRN: Why do you think inflation will win?

Jim Rickards: It’s been known since the 1950s, as Milton Friedman pointed out, inflationary effects occur with the lag. The fact that you saw QE in 2009 and inflation didn’t show up until the end of 2010 really should not give you a lot of comfort because an eighteen to 24 month lag is normal and would be expected. Sure enough, right on schedule, eighteen months after QE1 was announced in mid-2009 we’re starting to see the inflation.

HRN: What does inflation in foreign countries have to with QE2?

Jim Rickards: There are some new forces in play since Friedman did his seminal work and, of course, it’s the result of globalization. What has been happening is that what would otherwise have been US inflation is showing up in China and Taiwan and Korea and places like that because of the exchange rate mechanism. I put this under the heading of currency wars. In effect, China has been importing all of our inflation through the peg between the dollar and the yuan.

HRN: How does the yuan-dollar currency peg cause inflation in China?

Jim Rickards: Just think about the mechanics of it. There’s a lot of deleveraging going on, which is where the deflation comes from, so the Fed goes out and prints a whole bunch of dollars and spreads them around. Americans take a lot of those newly printed dollars and buy foreign goods so the dollars go to China, but China doesn’t want the yuan to appreciate because they want to maintain the peg, or at least they have until very recently. So, what do they do? They have to buy up the dollars. Well, in order to buy up the dollars they have to print yuan and basically give the yuan to the exporters in exchange for the dollars. Well, that’s basically flooding China with yuan and so the Fed’s printing press was being sterilized in America by the Chinese who were flooding their own country with their own local currency. So, through the exchange rate mechanism, and through the peg between the dollar and the yuan, our inflation was showing up in China and now it’s showing up in Vietnam, South Korea, Taiwan and other places.

HRN: Can the US keep exporting its inflation?

Jim Rickards: Like I said, inflation in the US was being offset by natural deflation and there is a time lag before inflation shows up. It has taken a while for inflation to show up in China because they also had a lag. US inflation was being exported through the currency exchange rate mechanism, but all good things come to an end. These things are now coming to an end for two specific reasons. Number one, the time lag just works its way through, and I think commodity prices, input prices, are where the inflation is really starting to show up and it will work its way through the supply chain and eventually show up in retail. Number two, the Chinese have now thrown in the towel on the appreciation or revaluation of the yuan and the reason for that is inflation.

HRN: So, the Chinese yuan will rise versus the US dollar?

Jim Rickards: Inflation is just another form of revaluation. What do you do when you revalue your currency? Well, you increase your cost structure relative to other countries. You make your goods more expensive from the view of a US purchaser, let’s say. Well, inflation does the same thing, inflation increases your cost structure. So, inflation and revaluation are the same thing economically with one very important difference; revaluation you can control, but inflation very quickly gets out of control. The Chinese, once they saw the inflation, said, well, look, this is going to happen anyway, our cost structure is going up and there’s nothing we can do about it. Our choice is between control and lack of control and, of course, they’re control freaks, so they’re going to go with control, which means they’re going to go with the revaluation and try to stay ahead of the inflation.

HRN: Do the Chinese have any other option?

Jim Rickards: They thought they had an ability to keep a lid on their domestic inflation through price controls. We all know that price controls always ultimately fail, but they can work in the short run, especially if you have a more coercive society and I would put China in that category. Whether there was going to be a black market or offshore money or the inability to enforce their rules at the local level, I think they quickly realized price controls were a losing battle.

HRN: What about other export nations, like Brazil?

Jim Rickards: The Fed is flooding the world with dollars and, as former US Treasury Secretary John Connally famously said in the 1970s, “it may be our currency, but it’s your problem”. Raising interest rates, currency debasement and capital controls are all tools in the toolbox that exporters can use to deal with Fed monetary policy and QE2. We’re seeing capital controls in Brazil, for example. Brazil couldn’t really control the appreciation of the real, there was just too much demand, too much hot money flowing into emerging markets, Brazil in particular. So there wasn’t much they could do about it from a currency point of view, so they’re putting in capital controls. The next step down that road, you pretty quickly go from currency wars to trade wars and trade wars lead to tariffs and then export quotas. We’re seeing a little bit of that in China with rare earth elements (REEs), although there’s another agenda with respect to REEs having to do with encouraging manufacturers to put their plants in China so they can get guaranteed access to the REEs.

HRN: Will the revaluation of the yuan and capital controls in other countries cause prices to rise in the US?

Jim Rickards: The inflationary chickens are coming home to roost in the United States. Once the Chinese throw in the towel and revalue the yuan, all of that inflation that Bernanke has been trying to get, but which has been going to China, et al will show up in the US. I think, we’re looking at significant inflationary forces, for all of the reasons I just mentioned, and that’s probably going to be the story of 2011.

HRN: So, the Federal Reserve caused inflation in Asia, South America and elsewhere resulting in currency wars and now there’s a risk of trade wars?

Jim Rickards: Correct.

HRN: If the US economy is recovering, why doesn’t the Federal Reserve stop QE2?

Jim Rickards: When you see data that point in a positive direction, you have to take a step back and say, okay, objectively, the data points in a positive direction but how much of that is policy induced and how much of that is self sustaining? My view is that almost all of it is policy induced and very little of it is self sustaining. I reach that conclusion by looking at data where, if we were in a self sustaining recovery, other things would be getting better and they’re not, such as unemployment. That suggests to me that it’s not a self sustaining recovery, therefore, I conclude that it’s mostly policy induced, which means the Fed is going to have to keep going.

HRN: Can inflation help the US economy to grow and help to reduce unemployment?

Jim Rickards: The main reason the Fed wants inflation has very little to do with growth and everything to do with the debt overhang and the fragility of the banking system. People forget that the Fed exists to help the banks. It’s the whole reason for the Fed.

HRN: Isn’t the purpose of the Federal Reserve to promote price stability and full employment?

Jim Rickards: The Fed was created by banks and it exists to prop up the banking system. The idea that it’s somehow a benign moderator of economic conditions, in my view, is nonsense. The Fed is first and foremost a device to prop up banks and, right now, the biggest problem in the banks is their bad assets.

HRN: Didn’t the bailouts and the Federal Reserve’s purchases of mortgage-backed securities clean up the bad assets?

Jim Rickards: The bad assets haven’t gone anywhere. They were identified in 2007, but they had been there all along. The bad loans were made in 2004, 2005 and 2006 because Greenspan and the Fed’s Board of Governors kept interest rates too low too long, so that’s when the bad loans were made. They were identified as such in 2007 and then we had the panic of 2008, but what’s important to understand is that the bad loans haven’t gone anywhere. It’s not as if they’ve been magically transformed into good loans, it’s not as if they’ve been marked down, it’s not as if they’ve moved from weak hands to strong hands. What’s happened is, they’ve basically been locked in amber, frozen on the balance sheets of the banks.

HRN: So, the Federal Reserve wants inflation to help banks that made bad loans?

Jim Rickards: The Fed is hoping for a couple of things. First of all, they’re hoping that inflation comes back so that, at least, the nominal values get back somewhere closer to where the loans were originated. Of course, the real value has all been eroded, but who cares? If you’re a bank, you just want that nominal value so you don’t have to take the loss and the hit to capital. Second, they’re hoping that, because of the steepness of the yield curve, the banks could eventually earn their way out of the problem and make provisions for the bad loans. Obviously, they’re going to the zero interest rate policy and so, with those two things in mind, the Fed wants the inflation to come and help the banks and give them time to recover.

HRN: Wouldn’t inflation also reduce the real value of the US federal government’s debt?

Jim Rickards: The United States has well over $100 trillion in obligations. Now, that’s not all bonded debt, the actual debt is significantly less than that, but when you throw in contingent obligation arising from Social Security, Medicare, Medicaid, Fannie Mae, Freddie Mac, Federal Housing Authority (FHA), Federal Home Loan Bank, student loans, et cetera, et cetera. The point is, you can just go on and on with these obligations. The number is well north of $100 trillion. Now, it’s not all due and payable in the next couple of years, these are twenty-year obligations, but then you have to say where are we going to get growth for the next twenty years to meet these obligations? That’s very hard to see.

HRN: So, the US economy can’t grow its way out of debt?

Jim Rickards: I don’t see any feasible combination of growth and taxes that will generate enough income to pay off the debt. People warn about the debt trap, to me it’s already too late. We’ve already fallen into a hole where, mathematically, it’s impossible to earn enough to pay off the debt. The debt is compounding faster than growth is being generated and raising taxes is not a solution because that will kill growth, so you just can’t get there.

HRN: What can the US federal government do about its debt?

Jim Rickards: There are two ways to deal with the debt. One is to just default; I just won’t pay you. The other one, of course, is the one that governments prefer which is inflation. You say, okay, here’s your trillion dollars and good luck buying a loaf of bread with it; it’s just not going to be worth very much. So, that’s what we’re doing and that’s another reason why Bernanke wants inflation. Of course, he doesn’t want hyperinflation, he doesn’t want ten percent [inflation], but he doesn’t need ten percent. If you do four percent a year for seventeen years, you cut the value of the debt in half. So, that $100 trillion figure I referred to, in real terms, becomes something more like $50 trillion, which is still a big number, but much more manageable than $100 trillion. He says he wants two percent or slightly less. I think that’s disingenuous, I think what he would like is something more like three or four percent [inflation] where, over a fifteen to twenty year period, you could really reduce the value of the debt in real terms very significantly.

HRN: If the US is debasing the dollar, why is there strong demand for US Treasuries?

Jim Rickards: The reason the Treasury auctions are going well is because the Fed is buying. Think about what quantitative easing really is. The amount of quantitative easing over the six month period from November to June is approximately equal to the federal deficit. In other words, the federal deficit is running about $1.4 trillion a year, so half of it would be $700 billion and the Fed is out to buy $600 billion. By the way, I don’t think it’s going to end in June and they never said it was going to end in June. What they said was, we propose to buy $600 billion of treasury obligations between November and June, but they never said it was capped at $600 billion. They just said we’re going to buy about $75 billion a month for the next six months. I don’t think they will stop there. I view this as much more likely to be a trillion dollar plus program, not $600 billion.

HRN: How does the Federal Reserve’s purchase of US Treasuries in the open market monetize US government debt?

Jim Rickards: These things are pretty fungible. Dollars are totally fungible and Treasury securities are quasi fungible because it’s the same credit in the same currency. So, imagine you’re an institutional investor and you’re holding an off-the-run seven-year note with five years to maturity and the government is issuing a new five-year note. Obviously, the primary dealers mediate this and are the interface between the Fed and the institutional investor. So, the Fed goes out and buys an off-the-run seven-year note from an insurance company, let’s say, and the insurance company replaces that in their portfolio by buying a new five-year note. From the insurance company’s point of view, they got rid of a five-year treasury and they bought a five-year treasury, so nothing happened. From the Fed’s point of view, they bought the five-year treasury with newly printed money and so there’s some intermediation and there’s multiple parties involved, but the net effect is exactly as if the Fed was monetizing the new debt.

HRN: Let’s get back to inflation. Can’t the Federal Reserve control inflation if prices start rising?

Jim Rickards: I think these processes are dynamically unstable and once you let the inflation genie out of the bottle, you don’t get two or three percent, you go straight to ten percent and that’s what happened in the 1970s. If you look at the late 1960s and early 1970s, inflation was one or two percent and then one year it pumped up to three percent and they said, oh my goodness, it’s three percen. After that, it went to five percent, then to eight percent, then to ten percent and then to thirteen percent. In other words, between 1977 and 1981, in that five year period, cumulative inflation was fifty percent. The value of the dollar was cut in half over that very short five-year period of time. So, that’s how it accelerates and gets out of control. I think that’s what’s going to happen again.

HRN: How much will prices go up in the US?

Jim Rickards: Bernanke says two percent, but he actually wants something closer to four percent. I think what he’s going to find is that it goes very quickly to eight or nine or ten percent, which is borderline hyperinflationary and that’s going to be a huge problem. It’s going to be a shock that the American people are not ready for.

HRN: What can the Federal Reserve do if price inflation starts to accelerate?

Jim Rickards: Well, Bernanke says, oh, don’t worry about high inflation because we have the ways and means of controlling that. If you take Bernanke at his word, which I don’t totally do, but if you do take Bernanke at his word and he says I want two percent and inflation goes to, let’s say, three or four percent, he’s saying, well, we can dial it back down to two percent. Well, how are you going to do that? One way is by raising interest rates, but are you really going to raise interest rates when unemployment is close to ten percent? Bernanke says he can raise rates, and legally he can, but he’s not actually, politically or economically, going to be able to do it because he’ll be raising interest rates in the face of the greatest sustained period of high unemployment since the Great Depression. So, it’s just not going to be politically possible.

HRN: Couldn’t the Federal Reserve remove liquidity from financial markets to counter inflation?

Jim Rickards: There’s another problem with QE2, which is that the Fed is probably insolvent today if you applied some rigorous mark-to-market tests and that will become more apparent as this process goes forward. Let’s just say Bernanke gets what he wants, and, all of a sudden, inflation starts to creep up and he says; okay, now we have to put on the brakes. Well, how do you do that? The way you do it is by reversing QE. In other words, QE is creating money to buy bonds. The way to reverse that is to sell bonds into the market and take the money out. Well, the problem is you’re going to have massive mark-to-market losses on those bonds. First of all, there’s the Bear Sterns junk and, remember, QE1 was not treasury securities, it was mortgage backed securities. They’re not going to be able to liquidate the bonds without going broke.

HRN: How can the Federal Reserve go bankrupt?

Jim Rickards: The Fed is on its way to a $3 trillion balance sheet. Their capital, in round numbers, is about $60 billion. With $3 trillion on the balance sheet and $60 billion of capital, they’re leveraged fifty to one. That’s worse than Long-Term Capital Management when they got in trouble in 1998. If you’re leveraged fifty to one and you have a two percent decline in assets, just two percent, and the stock market sometimes moves two percent in a single day, you just wiped out your capital. A two percent hair cut on $3 trillion is $60 billion and that takes your capital to zero and the Fed is broke.

HRN: Could the Federal Reserve’s primary dealers sell Treasuries to remove liquidity from the market and help keep inflation in check?

Jim Rickards: The primary dealers can’t create money through auctions or open market operations. The primary dealers can buy and sell securities but they’re doing it with money that already exists whereas when the Fed buys securities or sells securities they are creating or destroying money. The primary dealers can prop up the market in government securities, but they can’t create money the way that the Fed does or make money disappear the way the Fed does.

HRN: So, there’s nothing the Federal Reserve can do to control price inflation?

Jim Rickards: They’ve got to be looking down the road and saying, gee, we say we can get inflation under control, but the tools that we have to do that will basically be raising interest rates with ten percent unemployment, which is not going to happen, or selling bonds and going broke, which is not going to happen. So, it’s all talk. The Fed won’t actually be able to keep inflation under control and it’s going to very quickly fly out of control.

HRN: Won’t rising prices make most Americans poorer?

Jim Rickards: The Fed doesn’t care about that. The Fed doesn’t care about people. They don’t care about workers. They don’t care about wages. They say they do, but the Fed only cares about banks.

HRN: Bernanke has been in the media, saying that inflation will stimulate the US economy and help create jobs without causing prices to go up.

Jim Rickards: It’s propaganda. I had a discussion with former Fed governor, no reason to mention the name, who is a very well known economist, and what he said was that behind closed doors the Federal Open Market Committee spends about ten percent of their time on policy and ninety percent of their time on communication. They very quickly arrive at what they’re going to do and then spend the vast majority of their time thinking about messaging and wordsmithing. Well, there’s a name for that. It’s called propaganda.

HRN: Thank you for sharing so many of your insights with us today.

Jim Rickards: It’s my pleasure.

After Words:

Jim Rickards is one of the most astute intellectuals today in economics, financial markets and monetary systems, as well as an increasingly outspoken critic of the Federal Reserve’s monetary policies. The debasement of the US dollar – the world reserve currency – through QE2, and due to monetary expansion resulting from low interest rates, is exporting US inflation abroad, disrupting economies in Asia, South America and elsewhere. In addition to putting upward pressure on food prices globally, with potentially disastrous consequences, inflation is a hidden tax on savings and wages and, as prices rise, the living standards of most Americans will decline. Currency wars, caused by the Federal Reserve’s policies, could lead to trade wars or, in the worst case, to economic and political chaos as has been seen in Tunisia and Egypt.

Hera Research, LLC, provides deeply researched analysis to help investors profit from changing economic and market conditions. Hera Research focuses on relationships between macroeconomics, government, banking, and financial markets in order to identify and analyze investment opportunities with extraordinary upside potential. Hera Research is currently researching mining and metals including precious metals, oil and energy including green energy, agriculture, and other natural resources. The Hera Research Newsletter {3} covers key economic data, trends and analysis including reviews of companies with extraordinary value and upside potential.

This interview was originally released February 04 2011.

Click {4} to subscribe to the free weekly Best of Financial Sense Newsletter.






Categories: Uncategorized

The Renewable Revolution

Four Reasons Why the Transition From Fossil Fuels to a Green Energy Era Is Gaining Traction

by Michael T Klare

TomDispatch (April 16 2015)

Don’t hold your breath, but future historians may look back on 2015 as the year that the renewable energy ascendancy began, the moment when the world started to move decisively away from its reliance on fossil fuels. Those fuels – oil, natural gas, and coal – will, of course, continue to dominate the energy landscape for years to come, adding billions of tons of heat-trapping carbon to the atmosphere. For the first time, however, it appears that a shift to renewable energy sources is gaining momentum. If sustained, it will have momentous implications for the world economy – as profound as the shift from wood to coal or coal to oil in previous centuries.

Global economic growth has, of course, long been powered by an increasing supply of fossil fuels, especially petroleum. Beginning with the United States, countries that succeeded in mastering the extraction and utilization of oil gained immense economic and political power, while countries with huge reserves of oil to exploit and sell, like Kuwait and Saudi Arabia, became fabulously wealthy. The giant oil companies that engineered the rise of petroleum made legendary profits, accumulated vast wealth, and grew immensely powerful. Not surprisingly, the oil states and those energy corporations continue to dream of a future in which they will play a dominant role.

“Fossil fuels are our most enduring energy source”, said {1} Ali Al-Naimi, Saudi Arabia’s minister of petroleum and mineral resources, in April 2013. “They are the driving force of economic development in the US, Saudi Arabia, and for much of the developed and developing world [and] they have the capacity to sustain us well into the future”.

But new developments, including a surprising surge {2} in wind and solar installations, suggest that oil’s dominance may not prove as “enduring” as imagined. “Rapidly spreading solar technology could change everything”, energy analyst Nick Butler recently wrote {3} in the Financial Times. “There is growing evidence that some fundamental changes are coming that will over time put a question mark over investments in old energy systems”.

Normally, transitions from one energy system to another take many decades. According to Vaclav Smil {4} of the University of Manitoba, the shift from wood to coal and coal to oil each took fifty years. The same length of time, he has argued, will be needed to complete the transition to renewables, which would leave any green energy era in the distant future. “The slow pace of this energy transition is not surprising”, he wrote {5} in Scientific American. “In fact, it is expected”.

Smil’s analysis, however, assumes two things: first, that a business-as-usual environment in which decisions about energy investments will largely be made within the same profit-seeking outlook as in the past will continue to prevail; and second, that it will take decades for renewables to best fossil fuels in terms of cost and practicality. Both assumptions, however, appear increasingly flawed. Concern over climate change is already altering the political and regulatory landscape, while improvements in wind and solar technology are occurring at an extraordinary rate, rapidly eliminating the price advantage of fossil fuels. “The direction of change is clear”, Butler writes. With the cost of renewable installations falling, solar power has moved “from being a niche supplier to being a major regional competitor [to fossil fuels]”.

Experts largely agree that renewables will claim a larger share of the global energy budget in the years ahead. Nevertheless, most mainstream analysts continue to believe that fossil fuels will be the dominant form of energy for decades to come. The US Department of Energy (DoE) typically predicts {6} that the share of world energy provided by renewables, nuclear, and hydro combined will climb from seventeen percent in 2015 to a mere 22% in 2040 – hardly change on a scale that would threaten the predominance of fossil fuels. There are, however, four key trends that could speed the transition to renewables in striking ways: the world’s growing determination to put a brake on the advance of climate change; a sea change in China’s stance on growth and the environment; the increasing embrace of green energy in the developing world; and the growing affordability of renewable energy.

Taking Climate Change Seriously

Resistance to progress on climate change is widespread and well entrenched. As Naomi Klein documents in her latest book, This Changes Everything (2015), the major fossil fuel companies have mounted well-financed campaigns for years to sow doubt about the reality of climate change, while politicians, often in their pay {7}, have obstructed efforts to place restraints on carbon emissions. At the same time, many ordinary people have been reluctant to acknowledge what’s happening and so consider steps to bring it under control (a phenomenon examined by George Marshall in Don’t Even Think About It, 2014). As the devastating effects of extreme weather, including droughts, floods, and ever more powerful storms, gain greater prominence in everyday life, however, all of this is clearly in flux.

Considerable evidence can be assembled to support this assessment, including recent polling data {8}, but perhaps the most impressive indication of this shift can be found in the carbon-reduction plans major nations are now submitting to UN authorities in preparation for a global climate summit to be held this December in Paris. Under a measure adopted {9} by delegates to the most recent summit, held last December in Lima, Peru, all parties to the UN Framework Convention on Climate Change {10} (UNFCCC) are obliged to submit detailed action plans known as “intended nationally determined contributions” {11} (INDCs) to the global climate effort. These plans, for the most part, have proven to be impressively tough and ambitious. More important yet, the numbers being offered when it comes to carbon reduction would have been inconceivable only a few years ago.

The US plan, for example, promises {12} that national carbon emissions will drop 26% to 28% below 2005 levels by 2025, which represents a substantial reduction. There are, of course, many obstacles to achieving this goal, most notably the diehard resistance {13} of Republican legislators with strong ties to the fossil fuel industry. The White House insists {14}, however, that many of the measures included in the INDC can be achieved through executive branch action, including curbs on carbon emissions from coal plants and mandated improvements in the fuel efficiency of cars and trucks.

Other countries have submitted similarly ambitious INDCs. Mexico, for example, has pledged to {15} cap its carbon emissions by 2026, and to achieve a 22% reduction in greenhouse gas levels by 2030. Its commitment is considered especially significant, since it’s the first such pledge by a major developing nation. “Mexico is setting an example for the rest of the world by submitting an INDC that is timely, clear, ambitious, and supported by robust, unconditional policy commitments”, the Obama White House noted {16} in a congratulatory statement.

No one can predict the outcome of the December climate summit, but few observers expect the measures it may endorse to be tough enough to keep future increases in global temperatures below two degrees Celsius, the maximum amount {17} most scientists believe the planet can absorb without incurring climate disasters far beyond anything seen to date. Nevertheless, implementation of the INDCs, or even a significant portion of them, would at least produce a significant reduction in fossil fuel consumption and point the way to a different future.

A Sea Change in Chinese Energy Behavior

Of equal importance is China’s evident determination to reduce its reliance on fossil fuels – a critical change in stance, given its projected energy needs in the decades to come. According to the DoE, China’s share of world energy consumption is expected to jump {18} from an already impressive nineteen percent in 2010 to 27% in 2040, with most of its added energy coming from fossil fuels. Should this indeed occur, China would consume another 88 quadrillion British thermal units of such energy over the next thirty years, or 43% of all added fossil fuel consumption worldwide. So any significant moves by China to reduce its reliance on those energy sources, as now being promised by senior government officials, would have an outsized impact on the global energy equation.

China has not yet submitted its INDC, but its plan is expected to incorporate the commitments made by President Xi Jinping in a meeting with President Obama in Beijing last November. Xi promised {19} to cap China’s carbon emissions by 2030 and increase the share of non-fossil fuels in primary energy consumption to around twenty percent by that time. He also agreed to work with the US “to make sure international climate change negotiations will reach agreement as scheduled at the Paris conference in 2015″.

Although the Chinese plan allows for continued growth in carbon emissions for another fifteen years, it substantially reduces the amount of new energy that will be derived from fossil fuels. According to a White House statement {20}, “It will require China to deploy an additional 800 to 1,000 gigawatts of nuclear, wind, solar, and other zero-emission generation capacity by 2030 – more than all the coal-fired power plants that exist in China today”.

It appears, moreover, that Chinese leaders are preparing to move even faster than their pledge would require in transitioning away from fossil fuels. Under pressure from urban residents to reduce punishing levels of smog, the authorities have announced ambitious plans to lessen reliance on coal for electricity generation and rely instead on hydropower, nuclear, wind, and solar power, as well as natural gas. “We will strive for zero-growth in the consumption of coal in key areas of the country”, Premier Li Keqiang told the {21} National People’s Congress, China’s legislature, this March.

As in the United States, the Chinese leadership will face opposition from entrenched fossil fuel interests, as well as local government structures. However, their evident determination to reduce reliance on oil and coal represents a real change of mood and thinking. It’s likely to result in a far different energy landscape than the one laid out by the Department of Energy and, until recently, most other experts. Despite repeated predictions of ever-increasing coal consumption, for instance, China actually burned less coal {22} in 2014 than in the previous year, the first such decline in decades. At the same time, it increased its spending on renewable forms of energy by an impressive 33% in 2014, investing {23} a total of $83.3 billion – the most ever spent by a single country in one year – to a renewable future. If China leads the way globally and such trends continue, the transition from fossil fuels to renewables will occur far sooner than expected.

Green Goes Global

The giant oil companies have long acknowledged that the most advanced countries, led by the US, Japan, and Europe, would eventually transition from fossil fuels to renewables, but they continue to insist that developing nations – eager to expand their economies but too poor to invest in alternative energy – will continue to rely on fossil fuels in a big way. This outlook led ExxonMobil and other oil firms to make massive investments {24} in new refineries, pipelines, and other infrastructure aimed at satisfying anticipated demand from the global South. But surprise, surprise: those countries are also showing every sign of turning to renewables in their drive to expand energy output.

The global South’s surprisingly enthusiastic embrace of renewables is impressively documented in Global Trends in Renewable Energy Investment 2015 {25}, a recent collaboration between the Frankfurt School of Finance and Management and the UN Environment Programme. It reports that the developing countries, excluding China, spent $30 billion on renewables in 2014, a substantial rise over the previous year. Together with China, investment in renewables in the developing world totaled nearly as much as that spent by the developed countries that year. Significant increases in spending on renewables were registered by Brazil (for a total of $7.6 billion), India ($7.4 billion), and South Africa ($5.5 billion); investments of $1 billion or more were posted by Chile, Indonesia, Kenya, Mexico, and Turkey. Given how little such countries were devoting to a renewable future just a few years ago, consider this a sign of changing times.

No less striking is the degree to which oil-producing countries are beginning to embrace green energy. In January, for example, the Dubai Electricity and Water Authority awarded {26} a contract to Saudi Arabia’s ACWA Power International to build a 200-megawatt, $330 million solar electricity plant. The deal received widespread attention, as ACWA promised {27} to deliver electricity from the plant for $58.50 per megawatt-hour, one-third less than the cost of natural gas-fired generation.

“This is a major breakthrough in the oil-fired Emirates and a clear demonstration of the ongoing global energy transition”, suggested {28} Mark Lewis of Kepler Cheuvreux, a European financial services company. “We think this is a landmark deal both in terms of the extremely competitive cost at which the project will generate power and the potential for a much greater take-up of renewables in countries that have so far been slow to embrace them”.

The Falling Price of Renewables

As the Dubai deal indicates, price is playing a crucial role in the shift from fossil fuels to renewables. Listen to the apostles of coal and oil and you’d think that poor countries had no choice but to rely on their chosen form of energy because of its low cost compared to other fuels. “There are still hundreds of millions, billions of people living in abject poverty around the world”, said {29} Rex Tillerson, the CEO and Chairman of ExxonMobil. “They need electricity they can count on, that they can afford … They’d love to burn fossil fuels because their quality of life would rise immeasurably, and their quality of health and the health of their children and their future would rise immeasurably”.

Until recently, this would have been gospel among mainstream energy experts, but the cost of renewables, especially solar power, is dropping so rapidly that, even in a moment when the price of oil has been halved {30}, the news on the horizon couldn’t be clearer: fossil fuels are no longer guaranteed a price advantage in delivering energy to developing countries. Among the harbingers of this change: the cost of solar photovoltaic cells (PVs) has plunged {31} by 75% since 2009 and the cost of electricity generated by solar PVs has fallen globally by fifty percent since 2010. In other words, solar is now becoming competitive with oil and natural gas, even at their currently depressed prices. “Cost is no longer a reason not to proceed with renewables”, concluded {32} a report released by the National Bank of Abu Dhabi in March. Says {33} Lewis of Kepler Cheuvreux: “Over time, as renewable-technology costs continue to come down and economies of scale continue to increase, the relative competitiveness of renewables in the global energy mix will only increase further”.

Keep in mind as well that developing nations have a powerful reason to favor renewables over fossil energy that has nothing to do with price and everything to do with costs of another sort. As the most recent reports from the UN’s Intergovernmental Panel on Climate Change (IPCC) make clear {34}, poor countries in the global South will suffer more (and sooner) from the ravages of climate change than countries in the global North. This is so because these countries are expected to experience some of the sharpest declines in rainfall and so the most droughts, endangering the food supply for hundreds of millions of people. Combine such concerns with the plunging prices of renewable energy, and it appears that the transition away from fossil fuels will occur faster than predicted in the very regions that the oil companies were counting on for their future profits.

A New World’s A-Coming

Add up these factors, all relatively unexpected, and one conclusion seems self-evident: we are witnessing the start of a global energy transition that could turn expectations upside down, politically, environmentally, and economically. This transformation won’t happen overnight and it will face fierce opposition from powerful and entrenched fossil fuel interests. Even so, it shows every sign of accelerating, which means that while we may be talking decades, the half-century horizon previously offered by experts like Vaclav Smil is probably no longer in the cards. Fossil fuels – and the companies, politicians, and petro-states they have long enriched – will lose their dominant status and be overtaken by the purveyors of renewable energy far more quickly than that.

Even with the quickening of investment in green technology, the likelihood that world temperatures will be held at a two degrees Celsius rise, that all-important threshold for catastrophic damage, is unfortunately vanishingly small. Which means that our children and grandchildren will live in a distinctly less inviting world. But as the destructive effects of climate change become more pronounced and more embedded in daily life across the planet, the impetus to slow the warming phenomenon will only intensify. This means that the urge to impose strict curbs on fossil fuel consumption and the companies that promote it will grow, too.

We’re talking, in other words, about the building of genuine momentum for an energy transition which, in turn, means that the majority of people alive on the planet today will experience the ascendancy of renewables. As with previous energy transitions, this shift is going to produce both winners and losers. Countries and companies that assume early leadership in the development and installation of advanced green technologies are likely to prosper in the years ahead, while those committed to the perpetuation of fossil energy will see their wealth and power decline or disappear. For the planet as a whole, such a transition can’t come soon enough.





































Michael T Klare, a TomDispatch regular, is a professor of peace and world security studies at Hampshire College and the author, most recently, of The Race for What’s Left (2012). A documentary film version of his book Blood and Oil (2005) is available from the Media Education Foundation. Links to his work can be found at

Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Rebecca Solnit’s Men Explain Things to Me (2014), and Tom Engelhardt’s latest book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World (2014).
Copyright 2015 Michael T. Klare

(c) 2015 TomDispatch. All rights reserved.

Categories: Uncategorized

Any Reader of Orwell …

… would be perfectly familiar’ with US maneuvers (April 17 2015)

Major American media organizations diligently parrot what US officials want the public to know about global affairs, historian Noam Chomsky told RT. To US leaders, any news outlet that “does not repeat the US propaganda system is intolerable”, he said.

The culpability of the West – namely the United States – for world affairs, such as the Ukrainian conflict or tensions with Iran, is another idea that is not permissible in leading American media, Chomsky said, adding that world opinion does not matter when that opinion counters US strategy.

“The West means the United States and everyone else that goes along”, he said.

What’s called the international community in the United States is the United States and anyone who happens to be going along with it. Take, say, for example, the question of Iran’s right to carry out its current nuclear policies, whatever they are. The standard line is that the international community objects to this. Who is the international community? What the United States determines it to be.

He added that,

… any reader of [George] Orwell would be perfectly familiar with this. But it continues virtually without comment.

Chomsky’s remarks came this week just before a congressional hearing that was officially titled “Confronting Russia’s Weaponization of Information”. Of the meeting, House Foreign Affairs Committee chair Ed Royce said, “The Russian media is now dividing societies abroad and, in fact, weaponizing information”.

The social philosopher and MIT professor said, “if there were any imaginable possibility of honesty”, Representative Royce could be talking about the American media. He pointed to a recent New York Times story that discussed reasons not to trust Iran amid the tentative agreement {1} between Tehran and Washington, along with other major global powers, over the former’s nuclear ambitions.

Read More:

“The most interesting one is the charge that Iran is destabilizing the Middle East because it’s supporting militias which have killed American soldiers in Iraq”, Chomsky told RT‘s Alexey Yaroshevsky.

That’s kind of as if, in 1943, the Nazi press had criticized England because it was destabilizing Europe for supporting partisans who were killing German soldiers. In other words, the assumption is, when the United States invades, it kills a couple hundred thousand people, destroys the country, elicits sectarian conflicts that are now tearing Iraq and the region apart, that’s stabilization. If someone resists that tact, that’s destabilization.

Chomsky also related American media propaganda to recent moves {2} by US President Barack Obama to reach out to Cuba, which the US has long considered a state sponsor of terror while instituting a harsh embargo regime. Chomsky said top American media outlets go to great lengths to pit Cuba – and not the US – as the isolated party in the Western Hemisphere.

The facts are very clear. This is a free and open society, so we have access to internal documents at an extraordinary level. You can’t claim you don’t know. It’s not like a totalitarian state where there are no records. We know what happened. The Kennedy administration launched a very serious terrorist war against Cuba. It was one of the factors that led to the missile crisis. It was a war that was planned to lead to an invasion in October 1962, which Cuba and Russia presumably knew about. It’s now assumed by scholarship that that’s one of the reasons for the placement of the missiles. That war went on for years. No mention of it is permissible [in the US]. The only thing you can mention is that there were some attempts to assassinate [Fidel] Castro. And those can be written off as ridiculous CIA shenanigans. But the terrorist war itself was very serious.

Obama has changed course on Cuban policy not for reasons pursuant to freedom or democracy, as is peddled in the US media, Chomsky said.

“There is no noble gesture, just Obama’s recognition that the United States is practically being thrown out of the hemisphere because of its isolation on this topic”, he added.

But you can’t discuss that [in the US]. It’s all public information, nothing secret, all available in public documents, but undiscussable. Like the idea – and you can’t contemplate the idea – that when the US invades another country and the other resists, it’s not the resistors who are committing the crime, it’s the invaders.

As for international law, Chomsky said it “can work up to the point where the great powers permit it”. Beyond that, it is meaningless. Thus, is international law an illusion if the US picks and chooses – while exempting itself – from what is enforced?

“To say that [international law is] dead implies it was ever alive. Has it ever been alive?” he said, citing US stonewalling of the world court’s demand {3} in the 1980s that the US halt its war on Nicaragua and provide extensive reparations for damage done.

“International law cannot be enforced against great powers”, he said. “There’s no enforcement mechanism. Take a look at the International Criminal Court, who has investigated and sentenced African leaders who the US doesn’t like. The major crime of this millennium, certainly, is the US invasion of Iraq. Could that be brought to the international court? I mean, it’s beyond inconceivable.”

Chomsky said the so-called American Dream and US democracy are in “very serious decline”, as social mobility is among the worst among the richest nations. He added that, formally, the US retains a democratic veneer, but actual manifestations of democracy are dwindling.

“Basically, most of the population is disenfranchised”, he said, referring to public polling. “Their representatives pay no attention to their opinion. That’s roughly the lowest three-quarters on the bottom of the income scale. Move up the scale, you get a little more influence. At the top, essentially policy is made. That’s plutocracy, not democracy.”





Categories: Uncategorized

Another Idiotic Plan to Hurt Russia

2015/04/22 4 comments

America’s Start is Setting

by Mike Whitney

CounterPunch (April 20 2015)

The US must show the leadership necessary to establish and protect a new order that holds the promise of convincing potential competitors that they need not aspire to a greater role or pursue a more aggressive posture to protect their legitimate interests … We must, however, be mindful that … Russia will remain the strongest military power in Eurasia and the only power in the world with the capability of destroying the United States. {1}

For America, the chief geopolitical prize is Eurasia … and America’s global primacy is directly dependent on how long and how effectively its preponderance on the Eurasian continent is sustained. {2}

The Laussanne negotiations between Iran and the so called P5+1 group (the United States, Russia, China, France, Britain, and Germany) have nothing to do with nuclear proliferation. They are, in fact, another attempt to weaken and isolate Russia by easing sanctions, thus allowing Iranian gas to replace Russian gas in Europe. Laussanne shows that Washington still thinks that the greatest threat to its dominance is the further economic integration of Russia and Europe, a massive two-continent free trade zone from Lisbon to Vladivostok that would eventually dwarf dwindling US GDP while decisively shifting the balance of global power to Asia. To counter that threat, the Obama administration toppled the elected government of Ukraine in a violent coup, launched a speculative attack on the ruble, forced down global oil prices, and is presently arming and training neo-Nazi extremists in the Ukrainian army. Washington has done everything in its power to undermine relations between the EU and Russia risking even nuclear war in its effort to separate the natural trading partners and to strategically situate itself in a location where it can control the flow of vital resources from East to West.

Laussanne was about strategic priorities not nukes. The Obama administration realizes that if it can’t find an alternate source of gas for Europe, then its blockade of Russia will fail and the EU-Russia alliance will grow stronger. And if the EU-Russia alliance grows stronger, then US attempts to extend its tentacles into Asia and become a major player in the world’s most prosperous region will also fail leaving Washington to face a dismal future in which the steady erosion of its power and prestige is a near certainty. This is from an article titled “Removing sanctions against Iran to have unfavorable influence on Turkey and Azerbaijan”:

If Washington removes energy sanctions on Iran … then a new geopolitical configuration will emerge in the region. Connecting with Nabucco will be enough for Iran to fully supply Europe with gas …

Iran takes the floor with inexhaustible oil and gas reserves and as a key transit country. Iran disposes of ten percent of the reported global oil reserves and is the second country in the world after Russia with its natural gas reserves (fifteen percent). The official representatives of Iran do not hide that they strive to enter the European market of oil and gas, as in the olden days. Let’s remember that the deputy Minister of Oil in Iran, Ali Majedi, offered to revive project of Nabucco pipeline during his European tour and said that his country is ready to supply gas to Europe through it …

Some months earlier the same Ali Majedi reported sensational news: “two invited European delegations” discussed the potential routes of Iranian gas supply to Europe … It is also noted that the West quite materially reacted to the possibility of the Iranian gas to join Nabucco. {3}

So, is this the plan, to provide “energy security” to Europe by replacing Russian gas with Iranian gas?

It sure looks like it. But that suggests that the sanctions really had nothing to do with Iran’s fictitious nuclear weapons program but were merely used to humiliate Iran while keeping as much of its oil and gas offline until western-backed multinationals could get their greasy mitts on it.

Indeed, that’s exactly how the sanctions were used even though the nuclear issue was a transparent fake from the get go. Get a load of this from the New York Times:

Recent assessments by American spy agencies are broadly consistent with a 2007 intelligence finding that concluded that Iran had abandoned its nuclear weapons program years earlier, according to current and former American officials. The officials said that assessment was largely reaffirmed in a 2010 National Intelligence Estimate, and that it remains the consensus view of America’s sixteen intelligence agencies. {4}

See? The entire US intelligence establishment has been saying the same thing from the onset: No Iranian nukes. Nor has Iran ever been caught diverting nuclear fuel to other purposes. Never. Also, as nuclear weapons physicist, Gordon Prather stated many times before his death,

After almost three years of go-anywhere see-anything interview-anyone inspections, IAEA inspectors have yet to find any indication that Iran has – or ever had – a nuclear weapons program.

The inspectors were on the ground for three freaking years. They interviewed everyone and went wherever they wanted. They searched every cave and hideaway, every nook and cranny, and they found nothing.

Get it? No nukes, not now, not ever. Period.

The case against Iran is built on propaganda, brainwashing and bullshit, in that order. But, still, that doesn’t tell us why the US is suddenly changing course. For that, we turn to an article from The Brookings Institute titled “Why the details of the Iran deal don’t matter” which sums it up quite well. Here’s a clip:

At heart, this is a fight over what to do about Iran’s challenge to US leadership in the Middle East and the threat that Iranian geopolitical ambitions pose to US allies, particularly Israel and Saudi Arabia. Proponents of the deal believe that the best way for the United States to deal with the Iranian regional challenge is to seek to integrate Iran into the regional order, even while remaining wary of its ambitions. A nuclear deal is an important first step in that regard, but its details matter little because the ultimate goal is to change Iranian intentions rather destroy Iranian capability. {5}

Notice how carefully the author avoids mentioning Israel by name although he alludes to “the threat that Iranian geopolitical ambitions pose to US allies”. Does he think he’s talking to idiots?

But his point is well taken; the real issue is not “Iranian capability”, but “Iran’s challenge to US leadership in the Middle East”. In other words, the nuclear issue is baloney. What Washington doesn’t like is that Iran has an independent foreign policy that conflicts with the US goal of controlling the Middle East. That’s what’s really going on. Washington wants a compliant Iran that clicks its heals and does what its told.

The problem is, the strategy hasn’t worked and now the US is embroiled in a confrontation with Moscow that is a higher priority than the Middle East project. (The split between US elites on this matter has been interesting to watch, with the Obama-Brzezinski crowd on one side and the McCain-neocon crowd on the other.) This is why the author thinks that easing sanctions and integrating Iran into the predominantly US system would be the preferable remedy for at least the short term.

Repeat: “The best way for the United States to deal with the Iranian regional challenge is to integrate Iran into the regional order.. In other words, if you can’t beat ’em, then join ’em. Iran is going to be given enough freedom to fulfill its role within the imperial order, that is, to provide gas to Europe in order to inflict more economic pain on Russia. Isn’t that what’s going on?

But what effect will that have on Iran-Russia relations? Will it poison the well and turn one ally against the other?

Probably not, mainly because the ties between Iran and Russia are growing stronger by the day. Check this out from the Unz Review by Philip Giraldi:

Moscow and Tehran are moving towards a de-facto strategic partnership, which can be easily seen by the two groundbreaking announcements from earlier this week. It’s now been confirmed by the Russian government that the rumored oil-for-goods program between Russia and Iran is actually a real policy that’s already been implemented, showing that Moscow has wasted no time in trying to court the Iranian market after the proto-deal was agreed to a week earlier. Providing goods in exchange for resources is a strategic decision that creates valuable return customers in Iran, who will then be in need of maintenance and spare parts for their products. It’s also a sign of deep friendship between the two Caspian neighbors and sets the groundwork for the tentative North-South economic corridor between Russia and India via Iran. {7}

But here’s the glitch: Iran can’t just turn on the spigot and start pumping gas to Europe. It doesn’t work that way. It’s going to take massive pipeline and infrastructure upgrades that could take years to develop. That means there will be plenty of hefty contracts awarded to friends of Tehran –mostly Russian and Chinese–who will perform their tasks without interfering in domestic politics. Check this out from Pepe Escobar:

Russia and China are deeply committed to integrating Iran into their Eurasian vision. Iran may finally be admitted as a full member of the Shanghai Cooperation Organization (SCO) at the upcoming summer summit in Russia. That implies a full-fledged security/commercial/political partnership involving Russia, China, Iran and most Central Asian ‘stans’.

Iran is already a founding member of the Chinese-led Asian Infrastructure Investment Bank (AIIB); that means financing for an array of New Silk Road-related projects bound to benefit the Iranian economy. AIIB funding will certainly merge with loans and other assistance for infrastructure development related to the Chinese-established Silk Road Fund … {8}

Get the picture? Eurasian integration is already done-deal and there’s nothing the US can do to stop it.

Washington needs to rethink its approach. Stop the meddling and antagonism, rebuild relations through trade and mutual trust, and accept the inevitability of imperial decline.

Asia’s star is rising just as America’s is setting. Deal with it.











Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press, 2012). Hopeless is also available in a Kindle edition. He can be reached at

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Is Western Policy on Ukraine Putin’ World at Risk?

The West’s support of the Ukraine revolution could have been a tipping point in bad relations with Russia.

by Victor Kotsev

WhoWhatWhy (April 20 2015)

You know you have a problem when Henry Kissinger and Noam Chomsky agree on something. But then, the Ukraine crisis can create strange bedfellows. Kissinger and Chomsky agree that the Obama’s administration and its EU allies helped stir a tragedy in Ukraine by misjujdging Ukraine’s critical significance to the Kremlin.

The fault-finding with the West’s clumsy affronts to Putin’s Russia may, in fact, have only just begun: A recent British Parliament report described Western strategy in Ukraine as “sleepwalking”. At times, the critical analysis borders on the absurd. The British are “explaining” their role in the mess by claiming they didn’t have enough diplomats with Russian skills to follow the situation properly.

But there’s nothing funny about the mess itself. The West’s failure to understand Putin’s strategic interest in  Ukraine helped spawn a civil war with thousands of casualties, hundreds of thousands displaced, and a country torn apart in such a way that it would take a miracle to put it back together. Even in the West, there is a vibrant community of foreign-policy pundits who acknowledge this debacle. Among them are the declining stars of the old Cold War, who are charging their successors with recklessly helping to start a new one by insisting that Ukraine join Nato.

Improbable Bedfellows Intercede for Russia

Of course, a loud chorus of opportunistic politicians as well as predictable voices in the press continue to paint Vladimir Putin as the sole villain in this tragedy. Now, to be sure, there is plenty to criticize in Russia these days – from political murders of dissidents to covert military support for the Ukrainian rebels to high-pitched sabre-rattling at home, complete with national TV showing footage of nuclear-tipped missiles rolling out of silos. But it’s one thing to criticize where criticism is due. It’s quite another to declare, as German Chancellor Angela Merkel reportedly did last year, that Putin may be out of touch of reality and is living “in a different world”.

A more nuanced view of what’s happened in the Ukraine begins with the West’s determination to expand Nato to Russia’s very borders. In 1998, after Nato extended membership in the military alliance to Poland, Hungary and the Czech Republic, George Kennan, the man who devised the original Western doctrine of deterrence against the Soviet Union half a century earlier, warned:

I think it is the beginning of a new Cold War. I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. This expansion would make the Founding Fathers of this country turn over in their graves.

Kennan’s words are echoed by the aging Mikhail Gorbachev, the Soviet leader credited with bringing down the Iron Curtain. Gorbachev insists that the West went back on a promise made to him not to enlarge Nato east of Germany. And he warned earlier this year that the West is “dragging” Russia into what could become a “hot war”.

As for Putin’s mental state? Stephen Walt, the star realist at Harvard’s Kennedy School of Government, argues that the wrong application of Kennan’s original doctrine of deterrence has led to the explosion of violence in Ukraine. In a January Foreign Policy article, Walt contended that Putin is “motivated primarily by fear or insecurity” – rather than over-vaulting ambition – and that “applying the deterrence model [issuing warnings and credible threats] to an insecure adversary will heighten its paranoia and fuel its defensive reactions”.

Putin himself projects a rather different image. Russia’s elites perceive him as a triumphant meritocrat, a strategist whose equal the West doesn’t have and hasn’t had since Churchill or Reagan. This is the view of  Victor Mizin, vice president of the Center for Strategic Assessments in Moscow. Mizin adds that Russian insiders are highly skeptical of President Barack Obama’s foreign policy skills and see him at this point as merely a “lame duck”.

Mizin and and many of his counterparts among Western analysts dismiss the occasionally grotesque propaganda circulated by the Russian government in Moscow as strictly for homefront consumption. They believe that Putin is rational in his foreign policy and that the West should reach out and make a serious offer to him, taking in mind Russia’s strategic interests.

Putin may be no Churchill, but for all his authoritarian leanings, neither is he the dictator that Western observers often make him out to be. With his eighty-plus percent domestic popularity ratings and his considerable reach throughout Eastern Europe – even across the continent – he has demonstrated that if, anything, he is more in touch with certain local realities than are his opponents.

Ukrainian Instability

Meanwhile the post-revolutionary Ukrainian government, to whose aid the US is sending military advisers over Russia’s objections, is hardly any more democratic or reliable as a partner than Russia is. Ukraine has, for example, clearly surpassed Russia in politically motivated murders over the past few months. The Ukrainian economy is nearing a total collapse.

The most enthusiastic fighting units in the Ukrainian forces appear to be made up of former criminals and neo-Nazis; the low morale of the regular army was on full display two months ago as the beaten soldiers pulling out of the Debaltseve battle gave in to several days of massive looting and drinking on their own territory.

Ukraine is not only divided between East and West, Russian-speaking and Ukrainian-speaking regions; it is also an uneasy mosaic of different ethnicities and religions, often concentrated in certain geographical enclaves. If law and order continue to unravel in the country, it’s hard to predict where the next trouble spots will be. What seems most likely is that Russia will play an important role in this process – either as a peacemaker, in the event a more comprehensive deal can be reached that protects its interests, or as a spoiler.

There is a long history of US and European leaders slighting Russia on various policy issues, from going around the UN to attack several countries to refusing to expand Nato. Ukraine is just the latest and most serious example to date. In any case, it’s time to take Putin seriously. The alternative would be the “Bosnia-ization” of Ukraine, as Mizin put it, or the chaotic fragmentation of the country into several warring statelets. And that kind of “trouble” might be difficult to keep from spreading beyond Ukraine’s borders.

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Dollar Hegemony and the Iran Nuclear Issue

The Story Behind the Story

by Peter Koenig

Global Research (April 09 2015)

International treaties are being held hostage by the west. There has been a lot of interference inside Iran by Washington.  The nuclear issue is just an excuse to undermine the Islamic Republic and has very little to do with anything else.

— Interview with RT by Soraya Sepahpour-Ulrich (April 06 2015)

This statement is right on the dot. The artificially created nuclear issue’ is just an excuse for regime change … perhaps yes. But there is more to it. While the expressed views on what the recent “Lausanne deal” really brought for Iran and the 5+1 participants may differ widely, one must sense that there is another story behind the story.

A little detail, nobody talks about, and maybe most pundits – even honest ones – are not aware of. In 2007 Iran was about to launch the Iranian Oil Bourse – an international hydrocarbon exchange, akin to a stock exchange, where all countries, hydrocarbon producers or not, could trade this (still) chief energy source in euros, as an alternative to the US dollar.

This, of course would have meant the demise of dollar hegemony – the liberation of the world from the dollar stranglehold. This was inadmissible for Washington. It would have meant the end of the dollar as the world’s chief reserve currency, and giving up the instrument of coercing the world into accepting Washington’s dictate, the tool that serves to dish out sanctions left and right – no way!

Hundreds of billions of dollars’ worth of hydrocarbons are traded on a daily basis; huge amounts of dollars that find no justification in the US economy, but – they allow the Federal Reserve to print money at will – and every new dollar is a dollar of international debt, filling the reserve coffers of nations around the world, thereby also gradually devaluing the US currency, but barely affecting the US economy.

As long as petrol and gas are traded in dollars – a ‘negotiated’ imposition on Saudi Arabia by Father Bush, friend of the House of Saud, in the early 1970s under the Carter Administration, in return for military protection – and as long as the world needs hydrocarbons to fuel its industries, so long the world will need dollars, insane amounts of dollars. The so-called Quantitative Easing (QE) allowed the US to print hundreds of billions, if not trillions of dollars to finance wars and conflicts around the globe, and to fund the relentless Zionist-Anglo-Saxon lie and propaganda machine. No problem. It’s just debt. Debt – paradoxically carried by the very countries that the empire eventually fights and lies to; countries which hold dollars in their reserves.

Hardly anybody knows that the real US debt, consisting of ‘unmet obligations’ has risen in the last seven years from about 48 trillion to close to 130 trillion dollars in 2014 (General Accounting Office), about seven and a half times the US GDP. Comparatively speaking, a debt by a multiple higher than that of ‘troika’ (EU-IMF-ECB) badgered and shattered Greece.

Allowing a country like Iran destroying the US hegemon’s power base by taking a sovereign decision to abandon the dollar for oil and gas trading – no way. A pretext had to be invented to surmise the country which according to George W Bush became a link of the axis of evil. What better than the nuclear threat – with the full support of Israel, of course. Bolstered by worldwide media manipulation, Iran became a nuclear menace not only for Israel and the entire region, but also for the US of A. A threat for the empire, some 15,000 kilometers away, when at that time the most powerful Iranian long-range missile had a range capacity of about 2,000 kilometers.

This sounds almost like the latest (bad) Obama joke, accusing Venezuela to be an imminent threat to the United States. It would be laughable, if it wouldn’t be so sad, so criminal actually. Because this lie is followed by economic warfare, akin to the one led against Russia – which – eventually backfired punishing the ‘sanctioneers’ themselves, especially the Europeans. When the real impact of the ‘sanctions’ became evident, the mainstream media were simply silent. People easily forget. Without opening their eyes, they remain gullible for the next lie.

The dollar is the ultimate pillar of the empire’s world hegemony. Without it, it is doomed. Washington knows it. You don’t have to look far to find similar examples to that of Iran. When Saddam Hussein announced in the late 1990s that he would sell Iraq’s petrol in euros, as soon as the embargo would end in 2000, a reason had to be found to invade his country. The WMD menace that never existed was sold around the world, including at the UN Security Council, and – bingo – the western media killing machine had created a motive for invading Iraq and to murder Saddam. As if this wasn’t enough, he was suddenly linked to 9/11 – and big miracle, Americans bought even this lie.

Muammar Gadhafi was another victim for asserting his country’s sovereignty. He announced a new hard currency for Africa, the Gold Dinar, backed by Libyan gold. Libyan and African hydrocarbons could henceforth be traded in an alternative currency to the dollar, the Gold Dinar. Gadhafi also intended to free Africans from the western predatory telephone giants, by introducing a Libya sponsored low-price mobile network throughout Africa. Gadhafi was atrociously murdered by CIA handlers on 20 October 2011. Libya today is a hotbed of civil unrest and murder.

Iran’s case is a bit more complicated. Iran has Russia and China backing. Nevertheless, with the propaganda machine painting a nuclear danger to the world, Iran could be brought to her knees, no problem. No matter what logic said and still says, no matter that the fifteen US key intelligence agencies assured the then Bush Administration that Iran has no plans of manufacturing a nuclear bomb, that Iran was genuine in using its enriched uranium for power generation and for medical purposes.

No matter that Iran’s enrichment process reached a mere twenty percent purity, enough for medical purposes, but far from the 97% required for a nuclear bomb, Iran had to be oppressed and under a web of lies made a pariah state, a risk for the world. That’s what the average American and European today believes. It’s a shame. Nobody openly dares talking about the only nuclear threat in the Middle East, Israel. That is another shame.

No matter what the Lausanne deal is today, or next June, after three more months of intense, but useless negotiations, no matter what a UN resolution would say about the deal, about the lifting of sanctions – Washington will always find a pretext to keep the stranglehold on Iran. As Soraya Sepahpour-Ulrich said, “International treaties are being held hostage by the west” – there is no international compact or law that prevents the only rogue state in the world, the atrociously criminal US empire from crushing its way to satisfy its abject greed.

Always – that is, as long as empire survives. And yes, the economic survival is only a question of time. Fifteen years ago some ninety percent of worldwide reserve holdings were kept in US dollars, or dollar denominated securities. In 2010 the ratio shrunk to about sixty percent; today it is approaching fifty percent. When it sinks below fifty percent, governments around the globe may gradually lose confidence in the greenback, seeing it as what it is and has been for the last 100 years, nothing else but a fraudulent Mickey-Mouse currency at the service of a Zionist dominated western financial system, not worth the paper it’s printed on; a currency that has been abusing and impoverishing the ‘non-aligned’ world at will.

Iran knows it, Russia knows it – without direct confrontation, the empire’s grip may not hold as long as the Iran deal is planned to last, some twenty to thirty years. Therefore, the large concessions that Iran had to make for ‘peace’ – to reduce its enrichment process to 3.37% just enough to fuel power plants, and to sell or transfer its stock of twenty percent enriched medical-grade uranium abroad – these concessions to reach this ‘glorious’ interim agreement, are unimportant. It is a winner for Iran, as announced by Iran’s Foreign Minister, Mohammad Javad Zarif, as well as Russia’s Sergei Lavrov. Even if Washington derails the agreement within the next three months, or at any time at will, as is likely, Iran has won a battle of credibility worldwide, as she is ready to adhere to a signed agreement, no matter how far its sets her back.

In fact, the rotten palaces of empire are crumbling as these lines are going to print. Two new international Asian based development and investment banks have been created within the last two years. The BRICS Development Bank was signed into existence in Brazil in July 2014 by the leaders of the five BRICS countries – Brazil, Russia, India, China and South Africa. Earlier this year sponsored by China and twenty other countries, the Asian Investment and Infrastructure Bank – AIIB, located in Shanghai, was created. Iran is a founding member of the AIIB.

Ecuador’s Foreign Minister has also just announced that the Venezuela sponsored Banco del Sur – development bank for the Latin American hemisphere – will become operational in the course of 2015. These three banks are direct challenges to the Washington dominated IMF, World Bank and IDB (Inter-American Development Bank). Guess which ones are the most notorious ‘allies’ of Washington and which against the will of the White House, are joining AIIB’s forty-some membership?’ They include the epitome of neoliberal Europeans – UK, France, Germany, Italy and Switzerland.

Washington’s seemingly blind and preposterous arrogance drives the closest allies into the ‘adversary’s camp. The Federal Reserve Bank announced on 2 April 2015 that it fined the German Commerzbank with 1.7 billion US dollars for dealing with Cuba, Sudan and Iran – Washington sanctioned countries.

This can only happen as long as all international banking transactions have to be channeled through US banks and controlled by the Rothschild dominated Bank for International Settlement. Russia, China and other Shanghai Cooperation Organization-aligned countries have already broken away from the dollar system for international contracts and money transfers, including hydrocarbon trading. They are about to launch an alternative to the western ruled privately owned SWIFT transfer systems. The new system could be joined by any country wanting to break loose from the predatory dollar claws.

When even the staunchest stooges of empire seek alliances in the East, the writing is on the wall, that the economic winds are shifting, that a tectonic sea-change is in the offing and that the Iran nuclear deal, one way or another, doesn’t really matter in the foreseeable future.


Peter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff and worked extensively around the world in the fields of environment and water resources. He writes regularly for Global Research, ICH, RT, Sputnik News, the Voice of Russia / Ria Novosti, TeleSur, The Vineyard of The Saker Blog, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed (2008), fiction based on facts and on thirty years of World Bank experience around the globe.

Copyright (c) 2015 Global Research

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